Common Invoice Payment Terms Every Freelancer Needs To Know
Using the right invoicing terms increases the likelihood of getting paid promptly and creating a professional impression.
As a freelance editor or writer, it’s vital that you take control of your invoicing and income. It’s impossible to plan ahead if you don’t know what you’re owed and what’s been settled.
You also need to understand your cash flow and workflow setup because you’re the boss—and the employee. This is the only way to get paid what you’re worth.
This means you need to set up a proper invoicing system and a means of ensuring that your invoices get paid as expected. This is where payment terms come in.
Why Payment Terms Are Important
Every invoice needs to have payment terms. These are the terms that dictate when and how a client pays you. Without them in place, you have no recourse when a client doesn’t pay you on time.
As the person supplying the product or service, you are well within your rights to dictate to your clients when and how you expect to get paid. These terms should always be set out in writing before any job starts so that both you and the client are prepared for what comes next.
When you have these terms established for both yourself and your clients, you have a means of enforcing payment should a client become problematic down the line.
The 5 Most Common Payment Terms Freelancers Use
Exactly how you bill your clients will depend on the type of work you do, as well as the types of clients you have. These are the most common payment terms used globally.
1. Payment In Net Days
This is probably the most common of all the payment terms. You invoice on a specific date, and the payment is due in a set number of net days from that date. How many days you specify is up to you and the clients you have. Net days terms can be anything from 7 days, 10 days, 15 days, 30 days, 60 days and even 90 days.
Remember, when you say net days you’re including weekends and holidays. This means that if you say payment is due seven days from the invoice date, you’re expecting payment in exactly one week.
With a setup like this, you can include elements like discounts for early payments and penalties for late payments.
2. Payment At The End Of The Month
This one is pretty simple. No matter what date the invoice is generated, payment is due on the last day of that same month. With this setup, you can bank on an influx of money at the end of the month, making it easier to budget for monthly bills.
This setup works well with retainer clients because they know how much the invoice is going to be, and they’re prepared to pay you a regular amount. It’s less popular when you have clients that you do ad hoc work for and you aren’t sure when you’re going to invoice them.
3. Payment In The Month Following
This is an extension of the previous setup. If you invoice a client in October, for example, the payment is due on a specific date that you set in November.
This option is far more reasonable if you do ad hoc jobs and you invoice clients at random intervals. You don’t end up with any short payment windows this way because the payment is not expected until the following month.
You do need to set the payment date for the following month, though. It’s common to set this for either the middle of the month or the end of the month.
4. Payment On Delivery Or Receipt
When you are supplying a product or a tangible service, this kind of payment term setup is very popular. You and your clients know that when you hand over the finished product, the client needs to make payment right away.
It’s incredibly important to ensure that terms like these are clearly communicated before any work commences. Otherwise, you may land yourself in an awkward situation where the client expects to settle the bill at month’s end or similar.
5. Payment In Advance
This is a great option for freelance editors working online, especially if you won’t be meeting your client or if the client is an individual rather than a university or corporation, for example. (It can be more difficult to collect outstanding payments from an individual, but that’s another blog article!)
It’s also an option to split the invoice for the job. You can ask for a deposit of 50% before the work begins, and then the balance is due either in net days after completion or on receipt.
Always Aim For Consistency And Clarity
As a freelancer, you should have set payment terms that you use for all of your clients. If you can make them the same across the board, it will make your life so much easier. You’ll know when to send out invoices, and you’ll know exactly when money is coming in.
Of course, your payment terms can vary depending on the type of project you’re working on. Retainer work can be billed monthly, while once-off large projects are usually billed in a more ad hoc manner. However, you should have your terms for different types of projects set out before the work comes in, so you know how to quote and communicate with your clients.
When you work as a freelancer, it’s also important to set up all your invoicing structures and payment systems upfront. This makes it easier to track your finances when the work starts coming in and ensures you don’t lose track of anyone who owes you money. You can use a self-employed invoice template to ensure your invoices look professional and to help you to set up a system that makes tracking payments simple.